(Bloomberg) — Wall Street has become less optimistic about Nike stock since 2017 after the sports apparel company’s warning of a slower year ahead prompted a group of analysts to remove buy calls on the stock.
Most Read from Bloomberg
The sneaker maker has lost ground to competition from rivals such as Adidas AG, and its disappointing forecasts have led at least seven brokers, including JPMorgan Chase & Co., Morgan Stanley and UBS Group AG, to abandon their bullish positions and move to the sidelines. Nike’s consensus rating — a proxy for the ratio of buy, sell and hold recommendations — fell to 3.8 out of five on Friday, its lowest level in more than six years.
Nike’s fundamentals are “much worse than we thought,” UBS analyst Jay Saul wrote in a note Friday, downgrading his recommendation on the stock to neutral from buy. “Its lifestyle business needs a major reset.”
Nike was once a darling of Wall Street analysts, but in recent months the world’s largest sportswear company has lost fans as rivals such as On Holding AG and Deckers Outdoor Corp have taken over. Hoka and Adidas gain market share by attracting consumers with new and innovative styles. . Last week, Sam Bowser of Williams Trading issued an early warning, telling investors to “sell stocks,” with a turnaround likely before 2026, if it happens at all.
Wall Street increased the cuts on Friday, with Morgan Stanley’s Alex Stratton downgrading Nike to the same weight. The combination of disappointing earnings and lower expectations has pushed its previously overweight thesis – based on revenue growth and improved P&L in the second half of fiscal 2025 – “out of the blue.”
Shares fell 21%, trading as low as $74.76 in New York on Friday, the stock’s biggest intraday decline in more than 23 years. Nike now has 21 buy recommendations, 20 holds, and three sells among analysts tracked by Bloomberg. The average price target is $95.
In a downgrade note from Stifel’s Jim Duffy, who downgraded Nike from buy to hold, pushing the growth potential even further, he asks investors to “check the success of unproven patterns and consider an uncertain backdrop of consumer expectations.”
However, many are still clinging to calls to buy. Loren Hutchinson, an analyst at Bank of America Corp., who raised her recommendation on the stock to buy in April, said that the guidance reset was larger than expected, but she sees the new estimates as achievable and that they “may prove conservative if the pace of innovation accelerates quickly.” To compensate for lifestyle challenges.
Right now, a combination of increasingly difficult macroeconomic conditions, an unfavorable channel mix, and volatility in China is weighing on the minds of many analysts, including Raymond James’ Rick Patel. He downgraded his market performance rating from outperform, writing that he had no confidence in revenue upside.
According to analyst Adrian Yeh of Barclays, the update “raised more questions and more uncertainty about the long-term health of the Nike brand.” Yeh downgraded the stock from “overweight” to “equal weight” and expects to remain on the sidelines until it sees greater evidence that the company’s strategic initiatives are driving renewed sales growth.
– With the assistance of Katrina Kombolli and Michael Messika.
(Updates stock movement and adds details about Barclays downgrade.)
Most read from Bloomberg Businessweek
©2024 Bloomberg LP